Being the very first buyer or two in a new community often comes with some significant price advantages. So does being the last one in a project that is at its end. However, there are disadvantages to being first or last as well.
Here’s what you should consider when deciding when to buy in a new home community:
Pricing & Market Changes
Builders often trim their asking prices to lift a new property out of the ground. Once they notch a few sales, they try to start raising their charges. They often have a schedule to keep increasing prices throughout the life of the project.
There is no rule of thumb about how low starting prices will be or how much higher they will rise once sales take off.
Years ago, when the housing market was flying high, the market was so hot in Chicago that Lexington Homes was able to jack up its prices by $70,000 in a single weekend. But that doesn’t happen anymore, says Lexington’s Jeff Benach.
Now it depends on the market and the competition in that market.
“We haven’t been able to raise our prices all that much since before the recession,” says Benach.
There isn’t any modus operandi builders tend to follow for how low prices might slip when a project is nearing completion, either. Every builder is different. If sales are strong, price cuts may not be necessary at all to move the last few houses.
“Pricing is always a very sensitive thing,” Benach confides. “If you come in too high, you can get slaughtered. And if you back off, it sends out all kinds of negative signals.”
At the beginning, though, “it is generally less expensive” to buy a sparkling new place in an exciting new subdivision in an up-and-coming new neighborhood or community, says Robert Turner, president of Habersham Land Co., which is developing Habersham, an award-winning coastal town in Beaufort, S.C. Builders usually “discount the homes early to generate interest and accelerate absorption.”
Early Buyers Pros & Cons
There are drawbacks to being first. One is you might not be able to get the best location within the new project. Sometimes, says Benach, builders do not release the best lots until the property is winding down, “just in case there’s a sales slowdown.”
There is no rule of thumb about lots, either. Some builders offer the best sites upfront, so if you wait too long, the early birds may have already gobbled them up.
Another issue early buyers could face is that there may be some design kinks in a new model which haven’t been worked out yet. Again, each builder operates differently, but when new designs are introduced in a new community, there could be a few flaws that architects either didn’t or couldn’t see on paper.
Perhaps a cabinet door in the kitchen hits a side wall when it is opened, for example, or the refrigerator door can’t be opened wide enough for the shelves to be adjusted or removed. These kinds of slip-ups will be corrected as the house is replicated throughout the project, but if you buy the first one, you probably are going to have to live with them.
“That’s why builders tend to repeat their products as much as they can,” both within the project and from project to project, Benach comments. “They’re tried and tested.”
But an even more important question early buyers need to consider is whether the builder or developer will be able to deliver what they promise.
“Will the integrity of the development and home construction be sustained?” asks Turner in South Carolina. “Will the vision be sustained? These are all inherent risks of buying early.”
Once the property is up and running with sales running on overdrive and the promised amenities added, the answer to those questions will be self-evident. An early buyer will have to take the builder at his word.
Some developers put in the big amenities first. The clubhouse, for instance, the golf course, or the shopping and dining district if the property is large enough. Individual builders sometimes don’t have the wherewithal to do that until later in the job. Consequently, you might be taking a big chance.
If those and other amenities are in place already, though, an early buyer will have the advantage of being able to dominate them, Turner points out. “The pool is never crowded, no waiting for the tennis courts, Johnny can ride his bike anywhere, kids can build their makeshift forts on empty lots.”
At the same time, however, you’ll have to put up with construction traffic rumbling down your street and the hammer-and-saw noise starting early in the morning and running until sundown. So the choice is listening to the construction din or the birds merrily chirping away.
Late Buyer Pros & Cons
“The advantage of buying later allows the purchaser to move into a secure physical environment,” Turner points out. “The roads are complete, homes are built, the sound of construction is minimal, and the vision is complete.”
Buying later in a community often makes it more difficult to meet your extended new neighbors, says Turner:
“The adage ‘the neighborhood has grown so large I just don’t know anyone anymore’ seems to be a common refrain as a neighborhood matures. People who are the new kids on the block seem to find it more difficult to meet existing residents who have already formed a bond.”
On the other hand, the developer points out, first buyers “generally find it easier to meet their neighbors” and “seem to form a strong bond.”
Something else to think about: When you are an early buyer, subcontractors are on the job almost daily, so they can swing over to your place to make any “punch list” fixes that may be necessary. These are the items you discovered at your final walkthrough prior to closing, but not worth waiting to move in until they are repaired. A scratched bathroom tub, for example, or a broken floor tile. But the end of the project, the subs have moved on and getting them back to fix cosmetic items may prove to be difficult.
Also, while that neighborly bond may be somewhat difficult to create when you are buying one of the final houses, builders often offer enticing prices to end a project and move on to the next one. “It is often too costly for builders to continue to maintain sales office on site for a few straggling homes,” says Benach at Lexington Homes.
Again, no rules of thumb concerning pricing. Every builder operates differently, and if sales are strong, they may not have to drop prices at all. If they do offer discounts, they probably won’t be anything near their starting prices. If they go too low, Benach points out, they risk angering previous buyers.
Still, if you see a sign glaring “Close Out” — or such as one spotted a few years ago in Southern Maryland saying “Grand Ending” — you can be pretty sure the builder is willing to dicker, and not just on prices, either. Options and upgrades also can be on the table. You might even be able to snag a choice lot.
You can’t assume any of this, though. Benach likens trying to pick when to buy to trying to decide when get in and get out of the stock; even the pros can’t do that with any degree of certainty. His advice: “If you find a house you love within a community you like, don’t wait. Buy it!”
Lew Sichelman
Lew Sichelman is a nationally syndicated housing and real estate columnist. He has covered the real estate beat for more than 50 years.
FAQs
Is it a good idea to buy a home 2022? ›
Our guide for When Should I Buy A Home says yes – December 2022 is a good time to buy. Here's why first-time buyers should jump back into the market: Mortgage rates made the largest one-month drop since 14 years ago. There are fewer homes available to purchase in most U.S. markets.
Is it better to buy a house before or after the new year? ›If you're looking for the best possible home prices, the best time of year to buy is when the fewest other buyers are looking: November through January. The winter months typically mean less buyer competition for homes, when the holiday season is in full swing.
Why you should wait until 2022 to buy a house? ›It's becoming harder to buy a house as prices are up year over year, and mortgage rates are soaring in 2022. At the same time, consumer prices on everything are also on the rise making it even more difficult to save money to buy a house next year.
How long should you live in a house to make it worth buying? ›Ideally, you should stay in a home for at least three to five years to break even on your mortgage. Your mortgage payment should be 25% or less of your pre-tax income. Get a thorough home inspection before you buy so there aren't any surprises. Have savings set aside to cover emergency repairs before you buy a home.
Is 2023 a good time to buy a house? ›High buyer demand has driven property prices up. There are fewer sellers, so prospective buyers need to contend with higher housing prices. As such, if you buy a home in 2023, you're likely to pay a premium. And unlike in 2021, you may not get a low mortgage rate to offset that higher price.
What month in 2022 Should I buy a house? ›Fall and early winter. A new analysis suggests that “buyers who close on their home in October will get the best deal compared to the spring buying season.” During the first full month of fall, buyers can expect to pay a 3.3% premium.
What is the cheapest month to buy a house? ›Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.
What is the effective age of a new house? ›Effective age is the age which reflects a true remaining life for the property, taking into account the typical life expectancy of buildings or equipment of its class and its usage.
Do new homes increase in value faster? ›The change in prices and pricing will depend on the number of homes on the market and the number of homebuyers in the market. In general, home value usually increases from new development.
Will it be cheaper to buy a house in 2022? ›Los Angeles Housing Market Forecast 2022 & 2023
According to some analysts, home prices in Los Angeles are unlikely to drop, but the rate of increase will moderate. In other words, prices will continue to rise, albeit at a slower rate than in the preceding two years.
Will 2024 be a good year to buy a house? ›
The forecast for the housing market is expected to get gloomier next year before rebounding to 2022 levels in 2024. Fannie Mae's Economic and Strategic Research (ESR) Group forecasts single-family home sales to post 5.67 million in 2022 before dropping to 4.42 million in 2023 and then climbing to 5.25 million in 2024.
Will house prices drop in 2022? ›The Office for Budget Responsibility (OBR) said it expects house prices to fall for the next two years, predicting a drop of 9% between now and autumn 2024.
Why should you live in a house for at least 5 years? ›In real estate, this calls to mind the five-year rule, which states that new homeowners should generally stay put for at least five years before selling their property — or risk losing money. The reason is that closing costs and real estate commissions will consume 7 to 15 percent of the cost of the house.
What month is the best month to buy a house? ›Generally, home prices are lowest in January because demand is low, inventory is low and fewer buyers are looking for homes. While January might be the best month to get the lowest price on a home, you pick from a smaller selection of homes.
How much do I need to make a year to buy a $500000 house? ›How much do I need to make for a $500,000 house? A $500,000 home, with a 5% interest rate for 30 years and $25,000 (5%) down will require an annual income of $124,192.
Is 2022 a good time to buy investment property? ›2022 is a balanced year for housing supply and demand. This is ideal for retail purchasers and rental property investors. No longer a “seller's” market. Rising interest rates raise the monthly mortgage payment, which reduces homebuyers and lowers property values.
What are house prices predicted to do in 2022? ›It said house prices will have risen 6 per cent by the end of 2022 but that they will fall 5 per cent in 2023 and a further 5 per cent in 2024 as a result of the sudden spike in mortgage rates caused by the government's fiscal plans. This would take house prices back to where they were last summer.
What is the slowest month to sell a house? ›Sellers can net thousands of dollars more if they sell during the peak months of May, June and July versus the two slowest months of the year, October and December, according to a 2022 report by ATTOM Data Solutions.
What is the best time to buy a house? ›Fall. Typically, the best time of year to buy a home is in the early fall. Families have already settled into new homes before the school year started. But the number of properties on the market is still relatively high compared to other times of the year, and sellers can be eager to sell.
Will house prices ever slow down? ›Morgan Stanley has predicted a 10% drop in housing prices from June 2022 to 2024. This is juxtaposed with the 45% pricing increase the U.S. housing market saw between December 2019 and June 2022.
What age is too early to buy a house? ›
When Should I Buy a House? Most states require that you reach the age of majority (typically 18) to complete legal agreements. Buying real estate and getting a loan both require that you sign a contract. But you can potentially own property as a minor as long as someone of legal age signs the contracts.
How long to live in a new house before selling? ›As a REALTOR® might tell you, in order to make up for closing costs, real estate agent fees, and mortgage interest, you should plan to stay in a property for at least 5 years before you sell your home.
Is 40 a good age to buy a house? ›When you hit your 40s, you may be on more solid financial footing than you were in your 20s. But that doesn't mean you should buy the priciest home on the block—even if you can afford it. Instead, consider the expenses and financial obligations that will come up through your 40s and into your 50s.
What adds the most value to a home 2022? ›- Garage Door Replacement. A new garage door updates the look of the home and adds to curb appeal. ...
- Manufactured Stone Veneer Installation. ...
- Minor Mid-Range Kitchen Remodel. ...
- Fiber-Cement Siding Installation. ...
- Vinyl Window Installation.
Typically new builds go down in price after you buy them, a bit like a car. This is because new builds have the premium price tag that's out of character for the area, so they come down before they go up – meaning it can take a while to start seeing any equity in your property.
Are new builds overpriced? ›There are many advantages to a new build-property, which is also why they are more expensive. They come with lower maintenance costs and these homes are generally far more energy efficient which means gas and electricity bills are also lower.
Will house prices be cheaper in 2023? ›Zoopla says all the leading supply and demand indicators it measures 'continue to point to a rapid slowdown from very strong market conditions. We do not see any evidence of forced sales or the need for a large, double digit reset in UK house prices in 2023. We still expect house price falls of up to 5% in 2023. '
Is 2025 a good time to buy a house? ›13% expect the market to favor home buyers in 2025. While just 8% expect that to happen by sometime in 2026 or sometime in the next five years. Metros in the South and Midwest are the least likely to see price declines over the next year. Vacation market areas are most likely to see price declines.
Will house prices increase in the next 5 years? ›...
House price predictions for 2023/2024.
In general, it's best to buy when you have your eye on the horizon and you're thinking long-term. Experts largely agree that you shouldn't own unless you plan on staying in the home for at least five years. That's because, thanks to their high start-up costs, houses don't usually make great short-term investments.
Is it smart to buy a home at 55 years old? ›
If you're in your 50s, it's not too late to buy a new home, but it's key to ask the right questions and make the wisest decisions possible. Above all, make sure you won't be stuck making mortgage payments years after retirement. Gallup. "Most U.S. Employed Adults Plan to Work Past Retirement Age."
Why retirees are selling their forever homes? ›Retirees are selling their forever homes to move into senior living communities that have everything within walking distance. Walking, as we all know, is one of the best exercises around, plus it's good for the environment, and there's no need to spend money on gas.
Is it worth buying a house at age 55? ›Buying a home after 55 is a major decision that is sure to impact your retirement. While some financial companies will give out loans to older buyers, most are wary of this for several reasons. According to personal finance expert David Ning, it's unwise to get a new 30-year fixed mortgage in your 50s.
What month do most homes sell? ›What Month Do Most Houses Go on the Market? Spring is when most houses go on the market. In 2022, the national number of homes for sale shot up an additional 120,000 from April to May—the fastest rate of growth all year. That number kept growing each month into the summer and reached 1.31 million home listings by July!
What month do most people sell their house? ›Spring (March-May)
The spring months are often considered the best month to sell a house. In fact, across the country, the first two weeks of May are often the busiest and most lucrative time for sellers. The spring has warmer weather, longer days, and lush landscaping opportunities that boost curb appeal.
In 44 of 50 of the largest metropolitan areas, the most expensive month to buy a home falls in June or July. Buyers who can wait until winter will find the cheapest months are most often January or February. Large metros see greater volatility from the cheapest to most expensive months.
How much do you have to make a year to afford a $1000000 house? ›Experts suggest you might need an annual income between $100,000 to $225,000, depending on your financial profile, in order to afford a $1 million home. Your debt-to-income ratio (DTI), credit score, down payment and interest rate all factor into what you can afford.
What income do you need for a 300K house? ›How much do I need to make to buy a $300K house? To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, the type of home loan, loan term, and mortgage rate.
How much house can I afford if I make $100000? ›A 100K salary means you can afford a $350,000 to $500,000 house, assuming you stick with the 28% rule that most experts recommend. This would mean you would spend around $2,300 per month on your house and have a down payment of 5% to 20%.
Is it better to rent or buy 2022? ›The buy versus rent debate
Rising interest rates in 2022 reduced affordability further, causing buyer pullback and a cooling marketplace. Some house hunters shelved their purchase plans and will wait for next year. In several cities, owning your own home is the clear choice.
Will 2024 be a good time to buy a house? ›
The forecast for the housing market is expected to get gloomier next year before rebounding to 2022 levels in 2024. Fannie Mae's Economic and Strategic Research (ESR) Group forecasts single-family home sales to post 5.67 million in 2022 before dropping to 4.42 million in 2023 and then climbing to 5.25 million in 2024.
Is 2022 a good year to buy a rental property? ›2022 is a balanced year for housing supply and demand. This is ideal for retail purchasers and rental property investors. No longer a “seller's” market. Rising interest rates raise the monthly mortgage payment, which reduces homebuyers and lowers property values.
What are 3 disadvantages to owning a home? ›- Large upfront investment. With the median home price breaking $400,000 for the first time ever in 2021, buying a house is a sizable investment that not everyone can afford. ...
- Requires a commitment. ...
- High cost of homeownership. ...
- More difficulty relocating. ...
- Chance of decreased home value.
Unlike homeowners, renters have no maintenance costs or repair bills and they don't have to pay property taxes. Amenities that are generally free for renters aren't for homeowners, who have to pay for installation and maintenance.